Walmart outsmarts protesters demanding wage increase.

By Rob Janicki

When Walmart recently announced they were raising the salaries of some of their hourly employees (associates), protesters were quick to use such action to aid them in their demands for a nationwide $15 per hour minimum wage.

There is a problem here and it's not particularly a pleasant problem to face.

Walmart can effectively afford to increase the salaries of their hourly associates without taking any real hit to the corporate bottom line.  The problem that arises is subtle.  How can small businesses compete with the Walmart salary increases?  Walmart's increase in hourly wages actually plays to their benefit, since it will have an adverse effect on competing small businesses, which operate on very thin profit margins.  Walmart will increase the numbers of those seeking employment with Walmart.  Meanwhile, small businesses will not be economically able to match the Walmart wage increases.  Small businesses are already at a disadvantage, since they cannot compete with Walmart on product pricing due to Walmart's world leading leverage of scale of volume in dealing with supplier pricing.  

This all means that small businesses will have to layoff some employees, while working the remaining employees to make up for the lost productivity of the laid off workers.  The other alternative is to raise their prices and put them at a still greater disadvantage, thus driving their customers to Walmart and their lower prices.  Apparently the protester can't comprehend that small retail businesses are already working on very slim profit margins.  Small businesses cannot simply increase their pricing since they are already at a significant profit margin disadvantage with Walmart on pricing.  

Walmart, while appearing to be a White Knight on the social issue of minimum wage parity and wealth redistribution, is simply operating in its own best economic interest.  What social protesters seemingly refuse to recognize is that they have played into the hands of Walmart as the unwitting co-conspirators with Walmart to maintain Walmart's dominance as the world's largest retailer.  It's simple economics and Walmart is smart enough to know that they have the power to dictate the labor wage rate, while putting increased operating pressures on small competing businesses that cannot match such wage increases and remain in business. 

So much for liberals understanding the dynamics of business economics.